Budgeting in 2010

Most everyone is thinking about their financial goals for the new year.

The big question on a lot of people's minds is, what should you do in this shakey economy? Spend more, or save for that rainy day?

While it’s always good to have a decent savings account in case someone loses a job, the key is not to invest in a long term savings right now. CDs (certificates of deposit) and other savings accounts where your money is locked away for a long period of time (as in greater than 6 months) are not a good financial choice right now. Why? Because interest rates are very low, and being stuck at a low return for 5 years because you locked during a recession is never a good idea.

So after you save, what are good things to spend your money on?

Well, while low interest rates are a bad thing for long term savings, it’s a great thing for loans. Now would be the time you refinance and lock in at a lower rate for the next 30 years on a mortgage, or maybe to buy a new car. All these types of borrowing will take advantage of a low rate, and boost your credit score if you pay your bills on time.

So if you've been saving to buy a new home or refinance your current home, now would be the ideal time to do it. This is especially true when buying, since not only are rates at near all-time lows, but you have the extra incentives being offered in the homebuyer tax credits being offered to qualified buyers.

If you're wondering whether you qualify, contact us. We'll be happy to go over the tax credit qualifications with you.